DEEP OWSHORE AND INLAND BASIN PRODUCTION SHARING CON"IXACTS DECREE 1999 Decree No. 9 [See Section Commencement. THE FEDERAL MILITARY GOVERNMENT hereby decrees as follows:- 1. Notwithstanding anything to the contrary contained in any other enactment or law, the provisions of this Decree shall apply to all Production Sharing Contracts as defmed in section 18 of this Decree, Production sharing contracts. 2. The duration of an oil,prospecting licence relating to Production Sharing Contracts in the Deep Offshore and Inland Basin shall be determined by the Minister and shall be for a minimum period of 5 years and an aggregate period of 10 years. --.. 3,-fl! Tile. c-8~",-s!~fi~~ ;ray&& i:y&r 2 Fluduction Star:ug COG~~ZC: $nail 9c detern~ined iil accordance with the Petroleum Profgs Tax Act as amended: V313, Tz; -. Duration of oil prospecting licencr 2cre1?ri;;z::cn of 2i.t-oleum ProEt Tax. Cap. 354 LFN. Provided that the ~Groleum Profits Tax applicable to the contract area as defined in the Production Sharing Contracts shall be 50per cent flat rate of chargeable profits for the duration of the Production Sharing Contracts. (2) Nothing contained in this Decree shall be construed as having exempted the Contractors from the payment of any other taxes, duties or levies imposed by any Federal, State of Local Government, or Area Council Authority. 4. -(l) Where the Nigerian National Petroleum Corporation (in this Decree referred to as "the Corporation") or the Holder and the Contractor have incurred any qualifying capital expenditure wholly, exclusively and necessarily for the purposes of petroleum Determination of investment tax credit and investment tax allowance.
A 5 16 1 999 No. 9 Deep Wshore and Inland Bmirr Production sharing Contracts Royalty payable in respect Of deep offshore productiorr sharing contracts. operations carried out under the terms of a Production Shzirg Contract in the Deep Offshore or Inland Basin, there shall be due. to the Parties in respect of the Production Sharing Contracts executed prior to 1st July, 1998, a credit (in this Decree referred to as "Investment Tax Credit") at a flat rate of 50 per cent of the qualifying expenditure in accordance with the Production Sharing Contract terms for the accounting period in which that asset was first used for the purposes of such operations. (2) In respect of Parties who executed P;scZuction Shaping Contracts after 1st July'1998, there shall be due to such Parties an allowance ("in this Decree referred to as an "Investment Tax Allowance") at a flat rate of 50 per cent of the qualifying expenditure in accordance with the provisions of existing applicable legislation for the accounting period h which that asset was first used for the purposes of such operations. 5.-(1) The payment of royalty in respect of the Deep Offshore Production Sharing Contracts shall be graduated as follows, that is - Area Rate a ix areas from 201 to 500 - * aetres wate depth L& per cent (b) (c) From 501 to 800 metres water depth From 801 to 1000 metres water depth 8 per cent 4 per cent (d) In areas in excess of 1000 metres depth 0 per cent (2) The royalty rate payable under the Production Sharing Contracts in the Inland Basin shall be 10 per cent. Computation of petroleum profit tax. 6. Computation and payment of estimated and final petroleum profit tax shall be made in US dollars on the basis of the US dollar returns filed.
Deep Ofshore and ldand Basin Production sharing Contracls 1999No.9 A517 7. Royalty oil shall be allocated to the Corporasion or the Allocation of Holder, as the case may be, in such quantum as shai1 generate an ro~alv hobtit ~f proceeds equad to actual royalty payable during each month and the concession rental payable annually in accordance with the Production Sharing Contracts terms. &-(l) Cost oil shall be allocated to the Contractor in such quantum as di&l generate 2: ~ ~ caf uproceeds t sufficient for the recovery of operating costs in oil prospecting licences as defined in the Production Sharing Con~acts and my oi! t~ining leases. derived therefrom. (2) All operating costs shall be recovered Is U.S. Dollars through cost oil allocations in accordance with the terms of the Production Sharing Contract. allocation of cost ail. 9. Tax oil shall be allocated to the Corporation or the Allocation of Holder, as the case may be, in such quantum as shall generate an "X 0". amount of proceeds equal to the actual petroleum profit tax liability 'payable during each month. 10. Profit oil, being the balance of available crude.oil after Allocation of deducting royalty oil, tax oil and cost oil, shall be allocated to profit oil. each Party in accordance with the terms of the Production Sharing Contract,. 1i.-ji j The Corporation or the Holder, as the case may be, shall pay all royalty, concession rentals and petroleum profit tax on behalf of itself and the Contractor out of the allocated royalty oil and tax oil. S (2) Separate tax receipts in the names of the Corporation or the Holder and the Contractor for the respective amounts of petroleum profit tax paid on behalf of the Corporation or the Holder and Contractor shall be issued by the Federal Inland Revenue Service (in this Decree referred to as "the Sei-vice") in accordance with the terms of the Production Sharing Contract. Payment of royalty. 12. The chargeable tax on petroleum operations in the Chargeable tax contract area under the Production Sharing Contracts shall be split petroieum operations. between the Corporation or the Holder and the Contractor in the same ratio as the split of profit oil as defined in the Production Sharing Contract between them.
A 51 8 1999 No. 9 Deep mshore and Inland Barin Prodzrction sharinn Conlracts Use of reallsable 13.-(1) The realisable price as defined in the Production price in determlnlng Sharing Contract established by the Corporation or the Holder in royalb' and petroleumacc~rdance with the provisions of the Production Sharing Contract, profit tax In respect of crude oil, etc. shall be used to determine the amount payable on royal5 tyd petroleum profit tax in respect of crude oil produced and lifted pursuant to the Production Sharing Contract. (2) The parameters for new crude oil streams produced from the contract area shall also be determined in accordance with the provisions of the Production Sharing Contract. Submission of receipts. Adaptation of laws. LFN' Cap 354 LFN. 14. The Corporation or the Holder, as the case may be, shall make available to the Contractor copies of the receipts issued by the Service beuing the names of each Party as defined in the Production Sharing Contract in accordance with each Party's tax oil allocation for the payment of petroleum profit tax under the provisions of the Production Sharing Contract. 15.-(1) The relevant provisions of all existing enactments or law, including but not limited to the Petroleum Act, as amended, and the Petroleum Profit Tax Act, as amended, shall be read with such modifications as ta bring them into cocfomity with the provisions of this Decree. (2) If the provisi~m cf my C&?+ enactment or law. including but not limited to the enacm.enta specifid h btibsecticr, (1) of this section, an inconsistent with the proiisions of this Decree, the pbvisions of this Decree shall prevail and the provisions of that other enactment or law shall, to--the extent of that inconsistency, be void. Management of 16.-(1) For the purpose of the efficient management of production sharing Production Sharing Contracts and joint ventures under this Decree, contracts and joint venture. the National Petroleum Investment Management Services (in this 1990 NO. 1. Decree referred to as "NAPIMS") shall be incorporated into a limited liability company under the Companies and Allied Matters Decree 1990, as amended. (2) Accordingly, NAPIMS shall be vested with the exploration and production properties and &sets owned by the Federal Republic of Nigeria for the purposes of this Decree.
Deep Oflshore and /17icrl?d Bu.si17 Pi~odz(clion ~17ol.ing COMII.NC.I.S 1999 No. 9 A 5 19 17. The provisions of this Decree shall be liable to review Periodic review. after a period of 10 years fiom the date'of the commencement and every 5 years immediately thereafter. 18. In this Decree, unless the context otherwise requires - Interpreration. "Corporation" means the Nigerian National Petroleum Corporation; "Contractor" rnezns any petroleum expioration and production company who has entered into a Production Sharing Contract agreement with the Cclrporaiion or entered into an agreement or mangement with any Nigerian Holder of an oil prospecting licence or an oil mining lease within the Deep Offshore and Iniand Basin; "Deep Offshore" means any water depth beyond 200 metres; "Holder" means any Nigerian company who holds an oil prospecting license or oil mining lease situated within the Deep Offshore and Inland Basin under the relevant provision of the Petroleum Act, as amended; "Inland Basin" means any of the following leasins, namely, Anambra, Benin, Benue, Chad, Gongola, Sokoto and such other basins as may be determined, from time to time, by the Minister; "Joint Ventures" means any agreement or arrangements under which the Corporation jointly owns and develops various oil and gas concessions in Nigeria; "Minister" means the Minister charged with responsibility for matters relating to petroleum and "Ministry" shall be construed accordingly; "Parties" includes the Corporation or any Nigerian company as the Holder and the Contractor;
A 520 1999 No. 9 Deep Ofshore UII~ I171and Basin Prociucfion shut-lng Confrcrcls "Production Sharing Contracts" means any agreement or artangements made.between the Corporation or the Holder and any other petroleum exploration and production company or companies for the purpose of exploration and production of oil in the Deep Offshore and. Inland Basins; "Service" means the Federal Inland Revenue Service. Citation and 19. This Decree may be cited as the Deep Offshore and Inland Basin Production Sharing Contracts Decree 1999 and shall be deemed to have come into force on 1st January, 1993. MADE at Abuja this 23rd day of March 1999 GENERAL ABDULSALAMI ALHAJI ABUBAKAR, Head of State, Commander-in-Chief of the Armed Forces, Federal Republic of Nigeria. EXPLANATORY NOTE (This note does not form pcrv ~f the above Decree bur is irgemied to explain its putport) The Decree provides, amongst other things, for the amendment of certain enactments to give legislative effect to the fiscal incentives given to the oil and gas companies operating in the Deep' Offshore and Inland Basin areas.under Production Sharing Contracts or such other Production Sharing Contract type arrangements between the Nigerian National petroleum Corporation or other holders of oil prospecting licenses and various petroleum exploration and production companies concerning the terms of the Production Sharing Contracts.